Chuck Mikolajczak
NEW YORK (Reuters) – The U.S. dollar rose for a second straight session on Wednesday as U.S. bond yields extended recent gains following a report that President-elect Donald Trump is considering using emergency measures to enact a new tariff program.
The yield on the benchmark 10-year U.S. Treasury note hit 4.73%, its highest level since April 25, after CNN reported Trump was considering declaring a national economic emergency to provide the legal basis for a series of sweeping tariffs on allies and adversaries. .
The Washington Post reported Monday that Trump was considering more detailed tariffs, which he later denied.
“This is fueling the whole strong dollar theme, and even with the disappointing ADP (employment data), the dollar is still stronger on the day,” said Mark Chandler, chief market strategist at Bannockburn Global Forex in New York.
“This means that people should not resist it, this is a real step that has not yet run its course.”
Previous US labor market data was mixed, with ADP’s national jobs report showing US private sector job growth slowed sharply in December to 122,000 from 146,000 the previous month. Economists polled by Reuters had forecast a gain of 140,000.
However, weekly initial jobless claims fell to an 11-month low of 201,000 and below estimates of 218,000, according to a Reuters poll of economists.
The index, which measures the dollar against a basket of currencies, rose 0.41% to 109.15, while the euro fell 0.36% to $1.0302.
The data was released ahead of the US government’s key monthly jobs report on Friday.
Markets are currently pricing in just 39 basis points of Federal Reserve policy easing this year, with the first interest rate cut likely coming in June.
Fed Governor Christopher Waller said on Wednesday that inflation should continue to fall in 2025 and allow the U.S. central bank to further cut interest rates, albeit at an uncertain pace.
Later on Wednesday, investors will be watching minutes from the Fed’s Dec. 17-18 meeting, which could show how many policymakers support keeping rates lower, given slowing inflation and the strength of the economy.
Analysts at Goldman Sachs said in a note that the Fed’s response function, “how they balance the potential impact of inflation with any negative growth impacts, will weigh on the dollar,” but for now they see a negative impact from tariffs on growth in the rest of the world. outweigh similar indicators in the United States, which will affect monetary policy.
Sterling weakened 1.06% to $1.2339 after falling to $1.2321, its lowest level since April 22 and its second weakest level in a year, even though it came at the same time as a sharp sell-off in British shares and government bonds. when the 10-year Treasury yield reached a 16.-1/2-year high.
Against the yen, the dollar strengthened 0.22% to 158.36 and approached the 160 level, prompting Japanese authorities to intervene to support the currency.
Japanese consumer sentiment worsened in December, a government survey showed, casting doubt on the Bank of Japan’s view that solid household spending will support the economy and justify further interest rate hikes.